H-1B visa: US move on pay will hit Indian IT firms

Silicon Valley will be able to hire more techies from India

Mumbai, November 16

A Congressional committee in the US has passed a legislation on Thursday that proposes to hike the minimum salary of H-1B holders from $60,000 to $90,000. While the move has led to worries about the impact on the Indian IT services industry, experts believe it will be a blessing in disguise for Indian techies working in the US.

The Protect and Grow American Jobs Act (HR 170), which was passed by the House Judiciary Committee, will also ensure that no American is replaced in order to bring in talent from overseas on an H-1B visa. “The Bill is very narrowly focused on H-1B dependent companies,” said Rajkamal Rao, Managing Director of US-based Rao Advisors. “This will primarily affect low-level techies dependent upon contract jobs to stay in the US. It will be a double whammy for them because they are hired by staffing companies (Indian IT services companies) in the hopes of placing them at low wages.”

Such companies will have to rethink their business models by moving up the value chain and not just making money through this “body shopping”.

The US currently has a shortage of about two million STEM (Science, Technology, Engineering and Mathematics) workers, while India has an excess of those skills. This means that despite the higher scrutiny on H1-B visas, India will continue to be the biggest source of STEM-related jobs in the US.

The new Bill proposes restrictions on companies that have more than 15 per cent of their workforce on H1-B visas, which means it will only impact Indian IT services companies heavily dependent on H-1B visas. Techies looking for jobs in high-tech firms in the US will still have doors open for them.

The Bill will also help reduce the middlemen, experts believe. “American companies have always been paying more than $90,000 to the likes of Infosys and TCS to get their work done. They, in turn, paid just about $60,000 to their employees working in the US. With the new Bill, American companies will be forced to cut down on these middle-men as they can’t afford to increase their cost by 50 per cent and Indian workers will finally be able to earn at par with American workers,” said Rajeev Dabhadkar, Founder, National Organisation for Software and Technology Professionals.

Advantage Silicon Valley

Silicon Valley start-ups pay an average of about $150,000 to engineers but they are often unable to get enough Indians to work for them as most of the H-1B quota is taken by large IT services firms.

“In the past it was very difficult for American companies to find talent available in India and that’s where they hired Indian IT services companies to fill in the gap. But with the increased wage requirement, these companies will have less incentive to hire an Indian company to find talent. Moreover, technology now has made it easier than ever for companies to recruit online, eliminating the need for any middle-men,” Dabhadkar said.

While large IT services companies will have to prove that they are not replacing an American worker in order to send an Indian to the US to work, the same rule does not apply to the Silicon Valley firms, which have much less than 15 per cent of their workforce on H-1B visas, making it easier for them to attract Indian talent.

Nasscom, however, termed the Bill as one driven by myths. “Unfortunately, this legislation is being driven by myths, not reality, and could harm US businesses, imposing an extraordinary amount of bureaucratic red tape, disrupting the marketplace, threaten US jobs, and stifle US innovation by unfairly and arbitrarily targeting a handful of companies,” its President R Chandrashekhar, said in a release.

Published on November 16, 2017

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